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Pfizer's Spin-Off Verdict: Generics Yes, Vet Drugs No

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Deep into its reassessment of non-pharma business units, Pfizer (NYSE: PFE  )  has signaled its intentions. It's looking at selling its animal health and nutrition businesses. Offloading the units would help the company refocus on segments of its business that promise more growth -- for instance, its off-patent drugs unit. That's a business the company intends to keep, Pfizer said in a statement. The consumer healthcare business will also stay.

The potential animal health and nutrition sales would be a trade: $5.5 billion in annual revenues in return for greater focus on pharma and sale proceeds that could be returned to shareholders. The animal health business brought in the lion's share of that $5.5 billion, with $3.6 billion in 2010 sales, while the nutritions unit accounted for $1.9 billion last year.

The company is exploring various options for the units -- sale or spinoff, for instance -- and may take a different approach to shedding each unit. It expects any transactions to take up to two years, and the company doesn't plan to offer another update on the potential deals till next year.

CEO Ian Read, who took the reins at Pfizer after Jeffrey Kindler's abrupt departure at the end of 2010, said back in February the company would be taking a hard look at its non-pharma businesses. Pfizer has to come up with some way to compensate for the loss of patent protection on its biggest drug, the $10 billion-plus Lipitor, and Read apparently believes that drugs are the answer, not ancillary businesses. The Established Products business is tagged for growth because of off-patent products' popularity in emerging markets, and Consumer Healthcare has the potential to leverage some older Pfizer products, the company says.

Investors and some analysts have been pressuring Pfizer to shrink itself after bulking up in a big way with the 2009 Wyeth buyout. Selling some non-pharma assets could fund stock buybacks and dividends, keeping shareholders happy through an expected decline in revenues over the next couple of years.

"The actions we're announcing today are driven by the potential to create value for shareholders and enable Pfizer to become a more focused organization, better positioned for future success," Read said in the statement.

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2/5/2016 4:02 PM
PFE $29.03 Up +0.03 +0.10%
Pfizer CAPS Rating: *****